Bridging the Two Americas

In the past four years, the income of the median family has fallen while the gap between executive pay and that of ordinary workers has continued to widen. Some of this trend is the result of deliberate Bush administration policies: tax cuts tilted toward the top, the defunding of social subsidies, the deregulation of corporate America, and the disempowerment of workers. But larger trends are also at work.

The fact is that America lacks a comprehensive policy either to ensure minimally adequate incomes for people at the low end of the labor market or to help them ascend career ladders. That's why so many millions of Americans are working full time and are still poor.

The absence of a systematic strategy to make work pay is more serious today because of the convergence of several long-term trends that leave working families more vulnerable than in the past. One such trend is the assumption that mothers of young children will be in the labor force, coupled with the gross inadequacy of socially provided or subsidized child care. Another trend is the weakening of equalizing institutions -- everything from trade unions to regulated industries to adequate unemployment insurance. Yet another trend is the globalization of commerce, which exports many good jobs and disproportionately hurts workers with the lowest skills and the weakest bargaining power.

To some extent, the impact of these trends was masked in the late 1990s by the brief appearance of full employment. With very tight labor markets, even low-skilled workers could bargain for moderately better wages. Management, facing labor shortages, was willing to invest more in training. The new, time-limited welfare system enacted in 1996, despite some draconian provisions, enjoyed a fortuitous rendezvous with a booming economy. The majority of people who left welfare were able to find work.

As the high tide of a full-employment economy has receded, the failures of employment and welfare policy have become all too visible. This Prospect special report, produced in partnership with the Ford Foundation, examines four interrelated areas of public policy: income support, welfare, job training, and the care of working people's children. Taken together, these policies should guarantee that anyone who works is not poor (other policies should lift from poverty people legitimately unable to work). But the policies that we do have are only an incomplete patchwork, and one that has been left even more threadbare since 2001.

The restoration of full employment would help a lot, but it would not be sufficient. The reason is that even with very tight labor markets, many jobs pay poverty wages, and many of these provide no serious training or opportunities for advancement. When costs of child care and transportation are included, the net income from low-wage work is not enough to live on.

This special report takes stock of the several facets of America's work support and income policies, and points to a better way. We hope a new administration will pay attention.